An Exciting Career in Accounting
Accounting Is Fun
Accounting is an exciting career path. Accountants identify, measure, and communicate financial information about businesses and other entities so that they may make informed decisions relating to their finances. Recording and reporting information about expenses, revenue, assets, liabilities, and equity are important to a business’s livelihood. This information will help them plan future endeavors and their associated costs more effectively.
Businesses can easily track expenses and revenue through the use of income statements. Income statements offer a snapshot of a business’s net worth for a specific period of time. Revenue is all the money received by the business for the sale of goods or services (Collins Dictionary of Economics 2006) and expenses are the money paid to cover the costs of doing the business. (Dictionary of Business 2006) Businesses revenues minus expenses become its net income. One of the primary objectives of accounting is to keep track of a business’s net income.
Another primary accounting objective is to maintain the company’s balance sheet. Balance sheets tracks the businesses assets, liabilities, and equity. Businesses assets should always be equal to its liabilities plus its equity.
Assets are anything of monetary value owned by a business or other entity. If you are a homeowner then your home is an asset. A liability is all the money owed by a business or entity and equity is the amount of the business owned by the company or other entity. A good example of a liability would be a mortgage.
Accounting affects many people worldwide including me and my family. We are a few years into purchasing our home which makes up a large portion of our families assets. The home we chose was worth more than the purchase price so we immediately had equity. Other family assets include my husband and the paycheck he brings in; plus, we rent out a garage apartment which is another source of income. At one point we had a long list of liabilities numerous credit cards, the monthly bills, and mortgage. In fact that list became so long that even with all families’ assets its monthly liabilities had grown to high. We wanted to lower our liabilities so that our equity could cover the entire balance.
At this point we turned to professionals to help us figure our finances better. These classes taught us how to pay off high interest creditors quickly. After paying off many of our creditors our monthly bills became lower. Some of the money we have saved on credit card payments has been put back into our home increasing its equity. This makes my family more financially stable and better able to make planned purchases.
Now, let’s relate this information relate this example back to balance sheets and income statements for a better idea of the transactions. My home is an asset worth 85000. My family paid 65000 for the house at auction this is the liability because we mortgaged it. We have 20,000 worth of appraised equity. On a balance sheet the 65000 dollars of liability plus the 20,000 in equity equal the 85,000 dollar asset.
On an income statement this would look a little bit different. We would show income into the home as revenues and mortgage payments as expenses. Are trouble was that credit card interest rates increased. Interest payments are expenses. For a family to operate within their budget their revenues must be greater than their expenses.
Increasing technology has made accounting much easier for both families and businesses. Software programs that perform many of the difficult functions for users automatically have replaced old paper and pencil log books. Information that previously took hours to calculate can be tallied with a simple click of a few buttons.
Some examples of this technology that most people recognize are Microsoft Excel and QuickBooks; however there are many more applications on the market that are more complex or that are tailored to a specific industry. For example, a large multi-national company like McDonalds probably cannot maintain all its many transactions through the use of a solution like QuickBooks. McDonalds must maintain diverse financial information. They track information like charitable donations and franchise profits. The technology used is tailored specifically to meet the company’s diverse needs.
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